Are you properly insured if you’re considering a remodel? (Image via google)

You have a big remodel planned this summer that includes a revamped master bedroom and bath, a new kitchen, and a small addition that will create a family room off the back of the house. You have been dreaming about cooking in your new kitchen and waking up in your new bedroom for months. You have all the contractors you need lined up. Your permits are in place and you feel like you have everything taken care. But, have you called your insurance agent?

One mistake that many homeowners make is doing major improvements to their home without consulting their insurance agent. There are several areas where this oversight can lead to problems with your coverage while the remodeling work is underway and after it is complete. First, you need to make sure you have the right kind and right amount of coverage to protect you during the construction. Don’t wait until work has already started as you don’t want to find out you are underinsured when it is too late to rectify that problem. Second, your insurance needs may change based on the outcome of the remodel.

Here are some steps you need to take to ensure you have the coverage you need to protect you during the process.

1. Call Your Agent

It is important to do this before work starts. There may be additional coverage you need to secure during the remodel. If you or a family member will be doing most of the work, you may need to boost or enhance your liability coverage in the event someone is injured. Your agent can also advise you if there are additional coverage’s you need to have in place during the project.

2. Increase Your No Fault Medical Protection

The medical payments portion of your homeowners insurance is likely very low as the primary concern under normal circumstances is liability. However, if you or members of your family or even other people like friends are going to be doing some of the work, you should increase this limit. In the event someone is injured during construction, any medical bills can be submitted to the insurance company for payment.

3. Check Out You Subcontractors

While many homeowners think to check the references of subcontractors, they don’t always think to inquire about the subcontractors insurance and bonding. If the person doing work at your house damages your property or injures someone, you need to know that they are carrying adequate insurance to cover those losses. If they do not, the liability may fall on you and your homeowner’s policy may not cover these kinds of claims, leaving you to pay the bill out of pocket. Verify coverage by asking for proof of insurance from any company or individual that will be performing work on your house. If a subcontractor is unable or unwilling to provide proof of insurance, you may want to hire someone else.

4. Consider Additional Coverage

If you are doing a large project, you may want to purchase additional coverage like a Builder’s Risk policy. This type of policy protects you from any damage to your house during the course of construction including damage from wind or rain, theft of materials, and vandalism.

Builder’s risk coverage falls under the category of specialty insurance products and provides property insurance for buildings while they are still being built. Standard property coverage would not cover damage to the building while it is under construction. Once the building is complete, the property owner would purchase a more standard property insurance policy to cover any damage to the building. It is kind of like a homeowner-to-be who has to get a construction loan in order to finance the cost of building a house and then get a mortgage once the house is complete.

This type of insurance also covers materials and equipment that are being used to construct the building and may be purchased to cover any loss exposure during renovations, not just for new construction.

Who Needs Builder’s Risk Insurance

During construction, the conditions are very different than they will be once the building is complete and there are more ways that losses can occur. Building owners are generally liable for anything that happens on their site. Builder’s risk offers the owner some protection from any loss of property.

What Does it Cover

Most Builder’s Risk coverage protects the land/building owner’s interest against losses resulting from fire, vandalism, lightning, wind, and other non-excluded weather conditions. Similarly to homeowner’s insurance, Builder’s Risk policies do not generally protect against losses caused by earthquakes, flooding, acts of war, or intentional damage caused by the owner. The timeframe of the policy generally aligns with the timeframe of the construction or renovation and expires once the work on the building has been completed. Builder’s Risk coverage would not usually continue to offer protection to the owner after the building is certified for occupancy.

The standard Builder’s Risk policy offers site-specific coverage which means that any materials and equipment that are not onsite would not be covered under the policy. If there are materials and/or equipment that is being stored in a different location for use on the project, a broader policy would be required. This type of coverage can be obtained through a Builder’s Risk policy that contains Inland Marine provisions.

Although the type of coverage provided at a high level is common across the majority of Builder’s Risk policies, the actual policies are often very detailed and tailored to the specific needs of the building project that is being insured. This ensures that the policy meets the specific needs of the individual project but also requires that the building owner and any other interested parties pay close attention to what is covered and not covered by the policy.

Who Buys Builder’s Risk Coverage

In most cases, the owner of the building being constructed would purchase the Builder’s Risk policy. In some circumstances, building owners may require that the general contractor or the company completing the construction secure this kind of coverage as part of the contract to build the building or complete the renovation.

Sometimes, the existing property insurance will cover any losses during building renovations or while an addition is being built. However, it is important for the building owner to verify that coverage with their current carrier prior to any work being done. If the renovation or addition is covered by an existing property insurance policy, there is no need to purchase an additional Builder’s Risk policy.